Why Amazon Chose Melbourne

On 4th August 2017 Amazon officially announced that its first Australian distribution center would be located in South East Melbourne. The former Bunnings warehouse is a 258,300 square feet space that will house thousands of products that will be dispatched to Amazon customers across Australia.

So, why Melbourne? Melbourne was an attractive city to Amazon mainly due to the infrastructure transport networks that it presents. Melbourne is the second-most populous city in Australia, with the second-busiest airport in the country. In addition, the Port of Melbourne is the busiest seaport for containerised and general cargo in Australia and the city also has the most extensive freeway network.

Given that Australia is one of the top ten e-commerce markets in the world, our country is an important strategic move not just for Amazon, but other US and global e-commerce companies. Last year Australia’s total e-commerce sales grew by 9%, and this year online sales are predicted to reach $32 billion, according to eMarketer. The growth of Australian B2C e-commerce has grown significantly over the past four years, from $15 billion in 2012 to $24 billion in 2016. Close to 65% of Australian consumers currently shop online, and this figure is expected to rise.

According to a Deliotte study, Amazon’s entry into Australia will cause huge disruption for the retail industry, as outlined in its annual Global Powers of Retailing report. “If Amazon isn’t on the agenda at board meetings for Australian retailers, then it should be,” says David White, national leader of Deloitte’s retail, wholesale and distribution group.

When Amazon first entered Deliotte’s Top 250 report in 2000, it ranked 186th – it is now in the 10th top global retailer based on revenues generated in 2015 and ranked the largest online retailer.

Only two Australian ranked in this top 250 list – Coles (Wesfarmers, driven by its Bunnings business) at 21st spot and Woolworths in 24th position.

“Where Amazon has entered new markets, impacts on local retailers have been seismic and across almost all categories and channels – So retailers can’t afford to wait and see what Amazon does – they need to be developing strategies and taking action now,” syas White.

Morgan Stanley estimates current sales of Amazon in Australia to be approximately $1 billion through overseas shipment. On the overall, Amazon’s Australian business will not drive significant growth for the company in relation to its total global revenue, however, our country does fit in nicely with its strategy of worldwide expansion and global retail domination.

 

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